Case Law Details
CASE LAWS DETAILS
DECIDED BY: ITAT, A BENCH MUMBAI,
IN THE CASE OF: ACIT Vs. Leonie M. Almeida, APPEAL NO: IT (SS) No. 256/M/2006, DECIDED ON: March 26, 2009
RELEVANT PARAGRAPH
4.2 Reverting to the issue raised, charge ability of interest in relation to demand raised in assessments is provided in section 220. The relevant sub section (2) is reproduced below as a ready reference.
(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub- section (l), the assessee shall be liable to pay simple interest at [one percent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid:]
[Provided that, where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 (or an order of the Settlement Commission under sub-section (4) of section 245D] the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded:]
4.3 There are also provisions for charge of interest in the scheme of Chapter XIX A of the Income-tax Act relating to the settlement of a case by Settlement Commission. The assessee under section 245C of the Act may file an application for settlement disclosing particular income. The Commission after following procedure prescribed may proceed to deal with the application or may reject the application and therefore the demand raised by the Assessing Officer in the assessment does not get vacated only on filing of application before the Settlement Commission. The/Settlement Commission has jurisdiction over the assessee only when it decides to proceed with the application and admits the application under section 245D(l)j Once the application is admitted, the assessee is required to pay the additional demand on the basis of income disclosed in the application within 35 days of the order of the Commission under section 245D(1) and in case the demand is not paid within the time allowed interest at prescribed rate is chargeable under 245D(2C). Similarly, when the Settlement Commission passes final order under section 245D(4) the tax payable in pursuance of such an order is required to be paid by the assessee within 35 days of the receipt of copy of the order and for failure to do so, the assessee is liable to pay interest at the prescribed rate under section 245D(6A). Thus the interest payable under section 220(2) and the interest payable under sections 245D(2C) and 245D(6) are in different contexts and have to be levied independently.
4.4 The jurisdiction of the Settlement Commission starts from the date the application is admitted under section 245D(1) and therefore from the said date the Assessing Officer has no jurisdiction and he cannot pass an assessment order. However, in case the assessment order has been passed before the date of admission of the application, it will be a valid order and the Assessing Officer will be entitled to recover the demand and charge interest under section 220(2) in pursuance of the said order till the date he has jurisdiction over the case i.e. till the admission of the case by Settlement Commission under section 245D(1). This has been clearly laid down by the Honourable Supreme Court in case of Damani Brothers (249 ITR 475). The interpretation of the said judgement adopted by CIT(A) to the effect that the jurisdiction of the Settlement Commission starts from the date of filing of application is not correct. In fact, a careful perusal of the said judgement shows that similar plea had been taken before the Supreme Court that the jurisdiction of the Commission started even prior to the date of admission of the application. The said argument had been raised following the observations of Honourable Supreme Court in case of Express Newspapers Ltd. (206 ITR 443) to the effect that the proceedings before the Commission were not confined to the income disclosed before it. However, Honourable Supreme Court did not find the argument legally tenable. The Honourable Supreme Court observed that the fact that proceedings before Settlement Commission were not confined to disclosed income, did not mean that even before the Commission decided to proceed with the petition, it could deal with the disclosed income. Before the Commission decided to proceed with the application, it could not complete assessment in respect of return which is pending before the Assessing Officer , nor could act as an appellate or revisional authority. It was accordingly held that Income-tax authorities were free to proceed in the prescribed manner till the Commission decided to proceed with the application under section 245D(1). The assessment order passed by the Assessing Officer prior to the admission of the application for settlement will subsist and recovery proceedings will continue. Honourable Supreme Court further observed that the assessment did not get automatically set aside on the admission of the application for settlement.
4.5 It is thus clear that in respect of demand raised in the assessment made before the admission of application for settlement under section 245D(1), the Assessing Officer is entitled to levy the interest under section 220(2) till the date of admission under section 245D(l). However, in case, in pursuance of the order of Settlement Commission, the demand raised in assessment is reduced, the interest would have to be revised accordingly. This has been made clear in the proviso to section 220(2) as per which where as a result of order under section 154, 155 245D etc. amount on which interest is payable is reduced the interest would be reduced accordingly. Therefore in our view the interest under section 220(2) will be legally leviable from the date of default in payment of demand by the assessee till the date of admission of the application by the assessee by Settlement Commission under section 245D(l).We order accordingly. The case of the assessee that no interest can be charged has to be rejected and the case of the revenue for charging interest up to the date of final order of Settlement Commission under section 245D(4) can also not be upheld. The revenue would thus succeed partly in its appeal.
